Consider a simple economy that produces only apples. The following table contains information on the economy's output, money supply, velocity of money, and price level. For example, in 2015, the money supply was €300, the price of an apple was €7.50, and the economy produced 800 apples. Fill in the table, and use it to answer the following questions. 2015 2016 Quantity of Money €300 €336 Velocity of Money 20 20 Price Level €7.50 Quantity of Output 800 800

Consider a simple economy that produces only apples. The following table contains information on the economy's output, money supply, velocity of money, and price level. For example, in 2015, the money supply was €300, the price of an apple was €7.50, and the economy produced 800 apples. Fill in the table, and use it to answer the following questions. 2015 2016 Quantity of Money €300 €336 Velocity of Money 20 20 Price Level €7.50 Quantity of Output 800 800

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter13: Monetary Policy

Section: Chapter Questions

Problem 6E

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Consider a simple economy that produces only pies. The following table contains information on the economy's money supply, velocity of money, price level, and output. For example, in 2016, the money supply was 100, the price of a pie was $5.00, and the economy produced 200 pies. Fill in the missing values in the following table, rounding to the nearest cent when necessary. Year Money Supply Velocity of Money Price Level Quantity of Output Nominal GDP (Dollars) (Dollars) (Pies) (Dollars) 2016 100 5.00 200 2017 105 10    200 The money supply grew at a rate of______% from 2016 to 2017. Since pie output did not change from 2016 to 2017 and the velocity of money _______ , the change in the money supply was reflected _________ in changes in the price level. The inflation rate from 2016 to 2017 was _____%.
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